SA's Trade Surpluses Hide An Inconvenient Truth

Analysing the reasons for the surplus show that the economy remains in a precarious position and is very vulnerable to the commodity cycle.

- Andrew Duvenage

In June, the country again recorded a trade surplus of R57.7bn, larger than the anticipated R54bn. In fact, we’ve been recording trade surpluses for 14 consecutive months, and for 21 out of the past 24 months. This year alone, the country recorded a trade surplus of R54bn in May, R51bn in April and R52bn in March. The cumulative trade surplus for the year-to-date is R255bn.

There are two material factors that have contributed to these extraordinary numbers. Firstly, exports have risen more than 50% year-to-date. There are base effects in play given the fall-off in global trade in 2020 as Covid-19 hit the world. Both global manufacturing and global trade – in other words, the volume of goods being traded – are currently at all-time highs. China has had its recovery led by this and it impacted demand for resources. This resulted in buoyant industrial commodity prices and growing demand as global supply chains kick back into gear as inventories are replenished and infrastructure-led recovery programmes are rolled out.

SA’s precious metals trade surplus for the year-to-date is currently R240bn. The impact resources are having is apparent if one considers that the cumulative trade surplus is R255bn for the same period. Interestingly, SA is seeing the benefit of buoyant commodity prices as opposed to volume increases. The country’s supply-side capacity constraints, including railways and ports, have likely impeded the volume of exports. This means the commodities windfall could have been significantly higher without these constraints.